Hong hints at smaller hike in minimum wage level

The next rise in the minimum wage is set to be a small one, and the 10,000-won-an-hour ($8.41) target is almost certainly in doubt.

During a KBS interview early Sunday morning, Finance Minister Hong Nam-ki said the Minimum Wage Commission must consider the effect of a minimum wage increase on the economy, employment and market.

“From the minimum wage hike, the proportion of low-earning workers decreased and the nominal wage growth rate increased,” Hong said. “But the rise also reduced the number of jobs sensitive to the minimum wage level, like day labor jobs.”

Adjusting the speed of minimum wage increases is needed, he said.

In an interview with KBS last month, President Moon Jae-in said the minimum wage increase does not have to meet his campaign pledge of 10,000-won an hour by 2020.

Under the Moon administration’s income-led growth policy, incomes are being driven up to stimulate spending. The minimum wage has been increased 29 percent over two years and now stands at 8,350 won, more than 16 percent below the target.

Many have blamed the rapid increase for the country’s sluggish growth, and lawmakers from both parties have been asking for a halt to the rises.

The Minimum Wage Commission, which sets the minimum wage, started meeting to discuss the level for next year on Thursday and is expected to reach a conclusion after four rounds of discussions by June 27.

During the KBS interview, Hong also said the government is considering extending the retirement age for workers.

Responding the moderator’s concern that the measure could reduce the number of jobs for young people, Hong said, “Considering that 800,000 people leave the labor market while 400,000 people enter every year, [extending the retirement age] would not cause such effect.”

Hong also responded to the bearish outlook for a comeback in the second half of the year, saying the administration has made a number of significant investments during the first quarter that will feed through to the growth rate later.

“The country’s economy will recover in the second quarter and will reflect the effect of using the national budget early and stimulating investment,” Hong said. “The economy will perform better in the second half of the year rather than the first half.”

The economy unexpectedly contracted around 0.3 percent in the first quarter compared to the fourth quarter last year. Two weeks ago, the Korea Development Institute reduced its outlook for 2019 growth to 2.4 percent from 2.6 percent. The adjustment matches the change announced by the OECD just a day earlier.

The deputy prime minister said earlier that the government’s debt-to-gross domestic product (GDP) ratio is likely to reach 40.2 percent next year. He added that the increase is inevitable considering the current conditions and the need for fiscal expansion.

The ratio is currently about 39.4 percent.

The finance minister emphasized the country should not be too worried about the rising debt-to-GDP ratio, saying the speed of change is more important than the ratio itself.